Dornan v Riordan
[1990] FCA 383
•31 JULY 1990
Re: JOHN HUGH MICHAEL DORNAN; REGINALD CHESTER CROWE and EXTENDED HOURS
PHARMACIES ASSOCIATION
And: J.M. RIORDAN; M.A. JACKSON; J.R. RICHARDSON (CONSTITUTING THE
PHARMACEUTICAL BENEFITS REMUNERATION TRIBUNAL) and THE COMMONWEALTH OF
AUSTRALIA
No. G849 of 1989
FED No. 383
Administrative Law
24 FCR 564
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sweeney(1), Davies(1) and Burchett(1) JJ.
CATCHWORDS
Administrative Law - Judicial Review - Pharmaceutical Benefits Remuneration Tribunal - s.98BD National Health Act 1953 (Cth) - whether failure by Tribunal to state adequate reasons for its determinations - whether failure to state reasons amounts to error of law.
Administrative Law - s.16 Administrative Decisions (Judicial Review) Act 1977 (Cth) - discretion - whether the determination should be set aside.
Acts Interpretation Act 1901 (Cth) - s.25D
Administrative Decisions (Judicial Review) Act 1977 (Cth) - s.16
National Health Act 1953 (Cth) - ss.98A, 98B, 98BD, 99
HEARING
SYDNEY
#DATE 31:7:1990
Counsel for the appellant: Mr J.J. Spigelman QC and
Mr A. Hughes
Solicitors for the appellant: Messrs Steve Masselos and Co.
Counsel for the respondent Mr J.I. Fajgenbaum QC and
the Commonwealth of Australia: Mr R.M. Downing
Solicitor for the respondent Australian Government
the Commonwealth of Australia: Solicitor
ORDER
The appeal be allowed.
The orders below be set aside and in lieu thereof, it be ordered that the decision of the Tribunal of 28 August 1989 be set aside ab initio.
The respondent pay the costs of the appeal and the costs below.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
This is an appeal brought by two pharmacists and the Extended Hours Pharmacies Association ("the Pharmacists") against an order made by a single judge of this Court under the Administrative Decisions (Judicial Review) Act 1977 (Cth)("the ADJR Act").
The application before the learned trial Judge sought orders of review setting aside a determination of the Pharmaceutical Benefits Remuneration Tribunal made 28 August 1989. A similar proceeding was brought by other applicants in The Pharmacy Guild of Australia and Ors v. The Commonwealth of Australia No. VG 273 of 1989. That application was heard and determined by Jenkinson J. who delivered judgment on 26 October 1989. Why the two proceedings, which both sought to challenge the determination of the Pharmaceutical Benefits Remuneration Tribunal under the ADJR Act on similar but not identical grounds, were not consolidated has not been explained to the Court.
Relevant provisions of the National Health Act 1953 (Cth) ("the Act") provide as follows:-
"98A. (1) For the purposes of this Part, there is hereby established a Tribunal to be known as the Pharmaceutical Benefits Remuneration Tribunal. ...
98B. (1) The function of the Tribunal is to determine the manner in which the Commonwealth price of all or any pharmaceutical benefits is to be ascertained for the purpose of payments to approved pharmacists in respect of the supply by them of pharmaceutical benefits.
(2) A manner determined under sub-section (1) shall -
(a) in the case of a ready-prepared pharmaceutical benefit - take as a basis -
(i) the approved price to pharmacists of the pharmaceutical benefit concerned; or
(ii) if the pharmaceutical benefit concerned is a form of a drug or medicinal preparation to which a substance has, or substances have, been added in accordance with a determination in force under sub-section 85 (3) relating to that drug or medicinal preparation - the approved price to pharmacists of that form of that drug or medicinal preparation, that was applicable on the first day of the month of the year in which the supply occurs;
(b) in the case of other pharmaceutical benefits - take as a basis the basic wholesale price of each ingredient that is applicable on the day on which the supply occurs; and
(c) provide for the addition of such fees and other amounts as are determined by the Tribunal. ...
(4) The Tribunal may approve criteria that it considers to be appropriate for use in determining the nature or magnitude of fees or other amounts referred to in paragraph (2)(c), and may, at any time, vary or revoke such criteria.
(5) In determining fees or other amounts referred to in paragraph (2)(c) and in approving criteria under sub-section (4), the Tribunal shall have regard to any principles determined, from time to time, by the Australian Conciliation and Arbitration Commission as being appropriate for the fixation of award wages or salaries. 98BA. (1) The Tribunal shall, as soon as practicable after the commencement of this section, and at such subsequent intervals as are determined by the Chairman, hold an inquiry to ascertain whether the Commonwealth price of all or any pharmaceutical benefits should be varied.
(2) The holding of an inquiry under sub-section (1) shall be by means of proceedings before the Tribunal. ...
98BD. (1) After the completion of an inquiry under section 98BA, the Tribunal shall issue, in a proceeding conducted in public, a statement, in writing, of its findings and the reasons for them.
(2) Where the Tribunal -
(a) determines fees or other amounts referred to in paragraph 98B(2)(c); or
(b) makes a decision approving criteria under sub-section 98B(4) or varying or revoking such criteria,
the Tribunal shall issue, in a proceeding conducted in public, a statement, in writing, setting out the terms of that determination or decision and the reasons for making it.
(3) Where the Tribunal issues a statement under sub-section (1) or (2), the Tribunal shall -
(a) submit to the Minister a report setting out the terms of the statement so issued; and
(b) cause to be published in the Gazette a notice setting out the terms of the statement so issued. 98BE. A determination of the Tribunal under sub-section 98B (1) shall come into operation on a date specified in the determination, not being a date earlier than the date on which a statement setting out the terms of the determination is issued by the Tribunal in accordance with section 98BD. ...
99. (1) ...
(2) An approved pharmacist or approved medical practitioner who has supplied a pharmaceutical benefit (other than a pharmaceutical benefit in respect of which there was in force, at the time of supply, a determination under section 85B) is, subject to the conditions determined under section 98C and applicable at the time of the supply, entitled to be paid by the Commonwealth -
(a) where the precription for the pharmaceutical benefit was a pensioner benefit prescription or an entitlement card prescription - an amount equal to the Commonwealth price of the pharmaceutical benefit as at the time of the supply; and
(b) in any other case - the amount by which the Commonwealth price of the pharmaceutical benefit, as at the time of the supply, exceeded the amount that the pharmacist or approved medical practitioner was entitled to charge under sub-section 87 (2) or (3)."
The statutory requirement to state reasons set out in s.98BD(1) and (2) above is amplified by s.25D of the Acts Interpretation Act 1901 (Cth) which provides:-
"Where an Act requires a tribunal, body or person making a decision to give written reasons for the decision, whether the expression 'reasons', 'grounds' or any other expression is used, the instrument giving the reasons shall also set out the findings on material questions of fact and refer to the evidence or other material on which those findings were based."
In a determination resulting from its ninth inquiry, dated 2 January 1987, the Tribunal announced that there was a need for an overall review of the then data base, including the base fee on which the remuneration of pharmacists was established. Subsequently, the Tribunal held public meetings. The Tribunal obtained a report from consultants it had engaged to conduct a study of the cost of dispensing pharmaceutical benefit prescriptions at five pharmacies which had been selected by the Tribunal. The Tribunal engaged other consultants, Deloittes, to undertake a study of 150 pharmacies. Deloittes also prepared a model of pharmacy dispensing costs. An interim report was issued by the Tribunal on 26 April 1989. The final report and determination was issued on 28 August 1989.
In that report the Tribunal stated, inter alia:-
"4. In order to ensure clarity and to reduce the potential for further misunderstanding about the elements of the total dispensing fee paid to pharmacists under the PBS, the Tribunal has decided that the manner in which the Commonwealth price of pharmaceutical benefits is to be ascertained will be restructured.
5. There will be two principal elements in the PBS prescription fee. The first will relate to labour costs and the second will relate to non labour costs. There will no longer be any element related to a mark-up on the cost of goods sold.
6. The basis for future fixation of fees will be an amount of $3.50 for each ready prepared item (RP) item (sic) supplied under the NHS.
7. The new base rate determined herein will result in a reduction in pharmacists
(sic) remuneration of $1.05 per RP item. This rate represents the maximum amount which is justified as a matter of equity and fairness having regard to all of the available evidence.
8. Because it represents a significant reduction in pharmacists remuneration, it has been decided that it should be phased in by making three adjustments each equal to 35 cents; the first effective on and from 1 October 1989, a second reduction of 35 cents effective on and from 1 May 1990 and the third reduction of 35 cents effective on and from 1 November 1990. Adjustments due on account of movements in award wages and the CPI during 1990 will be offset against these reductions.
9. Therefore the new fee effective on and from 1 October 1989 will be $4.20 per item supplied. The payment of a 25 percent mark-up on the wholesale price of drugs supplied will be abolished on and from 1 October 1989. In order to maintain the relativity for extemporaneously prepared items a fee of $5.40 on and from 1 October 1989 has been determined."
As can be seen, the Tribunal decided that there should be a reduction in the base rate from $4.55 for each ready prepared item to $3.50, a net $1.05 per item. This reduction was a very substantial one.
The trial Judge found that the Tribunal had failed to comply with the provisions of s.98BD in that it had not set out the reasons for making its determinations. We agree with the trial Judge in this respect. The Tribunal's obligation under s.98BD(1) and (2) of the Act and s.25D of the Acts Interpretation Act would not be breached by a failure to deal with every argument that may have been raised in proceedings before the Tribunal or with every possibility that could be adverted to. The duty must be sensibly interpreted and applied with a view to achieving good and effective administration. As Wilcox J. said in Our Town FM Pty Ltd v. Australian Broadcasting Tribunal and Anor (1987) 16 FCR 465 at p 481 with respect to an analogous section, s.25B of the Broadcasting Act 1942 (Cth):-
"There are, of course, limits upon the extent of the obligation arising out of s 25B. It is not necessary that the report deal with every matter which was, or which might have been, raised in the proceedings. It is enough that the findings and reasons deal with the substantial issues upon which the decision turned: See Tatmar ((1983) 3 NSWLR) at 385-6 and Bisley Investment Corporation v Australian Broadcasting Tribunal (1982) 59 FLR 132 at 145-146. In Ansett Transport Industries
(Operations) Pty Ltd v Wraith (1983) 48 ALR 500 at 507, Woodward J. described the obligation under s 13 of the Administrative Decisions (Judicial Review) Act in these terms:
'The passages from judgments which are conveniently brought together in Re Palmer and Minister for the Capital Territory (1978) 23 ALR 196 at 206-7, serve to confirm my view that s 13(1) of the Judicial Review Act requires the decision-maker to explain his decision in a way which will enable a person aggrieved to say, in effect: "Even though I may not agree with it, I now understand why the decision went against me. I am now in a position to decide whether that decision has involved an unwarranted finding of fact, or an error of law, which is worth challenging." This requires that the decision-maker should set out his understanding of the relevant law, any findings of fact on which his conclusions depend (especially if those facts have been in dispute), and the reasoning processes which led him to those conclusions. He should do so in clear and unambiguous language, not in vague generalities or the formal language of legislation.'"
It is, however, impossible to understand from the reasons given by the Tribunal why it was that the Tribunal adopted the precise base that it did. Although the interim report of the Tribunal was 239 pages in length and had many lengthy appendices including Deloittes' report and although the report of 28 August 1989 was itself 178 pages in length, the reasons do not make clear why the base figure of $3.50 for each ready prepared item was adopted. It seems from the interim and the final reports that the Tribunal was substantially influenced by what was contained in the Deloittes' study. But even so, while the reasons disclose the material which the Tribunal took into account, it is impossible to glean from the Tribunal's reasons what was the reasoning process that led it to its determination.
The Tribunal said in paragraph 2:-
"The decisions reached are the result of a considered judgement of the available material, all of which has been given appropriate weight and used with due caution. The result has not been reached by a series of arithmetical calculations without regard to the consequences which are likely to follow. Rather, the final conclusion is the result of balancing the findings of the studies and the available material on the cost of dispensing pharmaceutical drugs under the National Health Scheme on the one hand and a proper consideration of the likely effects of the adoption of these findings on the operation of the current pharmaceutical benefits scheme on the other."
In paragraph 7, in the passage we have already cited, the Tribunal also said:-
"The new base rate determined herein will result in a reduction in pharmacists (sic) remuneration of $1.05 per RP item. This rate represents the maximum amount which is justified as a matter of equity and fairness having regard to all of the available evidence."
These two statements are too general to make it clear what it was the $3.50 was considered to represent. Was the $3.50 thought to be a fair return to pharmacists having regard to their labour and their capital invested, was it thought to be a break-even fee for an average pharmacy, was it thought to be the most that the Commonwealth could reasonably be expected to pay or was it something else? The reasons do not disclose.
In his decision, in No. VG 273 of 1989, Jenkinson J. said:-
"As a matter of arithmetic the $3.50 can be seen to be very close to the sum which is produced by making to the average cost per prescription derived from the 1986-1987 information certain adjustments which either particular cost rises between 30 June 1987 and 1 August 1989 logically required or for reasons it gave the Tribunal stated, expressly or impliedly, that it would make. (An example of the latter kind of adjustment is allowance made for a 'notional salary' to the approved pharmacist himself (called 'the proprietor'). To this allowance reference is made by the Tribunal in paragraphs 14.2 and 15.12 of a report dated 26 April 1989 by the Tribunal (Exhibit E.34) and in paragraphs 1.3 and 3.6 of a statement called 'Report' and dated 28 August 1989, both of which reports form part of the Tribunal's reasons for the determination.) To that arithmetical correspondence the applicant added the circumstance that the $3.50 was declared in paragraph 13.5 of the Tribunal's 'Decision' to have 'been fixed on the basis of labour and non-labour costs as at 1 August 1989', and submitted that it must be inferred that the reference to 'labour and non-labour costs as at 1 August 1989' is to what the Tribunal thought to be the average cost per prescription derived from the 1986-1987 figures.
Perhaps the submission may be thought to gain strength from the circumstance that an average cost better satisfies some intuitive perception of rightness than an amount which bears no particular arithmetical proportion to the costs of all approved pharmacists or of any one approved pharmacist. ...
What has been quoted is but a small fraction of all the Tribunal's reasons for its determination. I have been unable to find in those reasons any indication of the values which formed the Tribunal's judgment as to what 'equity' or 'fairness', named in paragraph 13.11 of the passage last quoted, required. Nor have I been able to find any clear indication of the kind of 'effects' to which reference is intended in the penultimate sentence of the identical passages quoted from the 'Date Base Inquiry Statement' and from the 'Decision'. I am unable to accept the submission that it may be concluded that the Tribunal thought that $3.50 was the average cost per prescription as at 1st August 1989, although I think it safe to infer, as I have previously observed, that the Tribunal thought $3.50 to be not very far from that average cost. But it does seem that the Tribunal did not fix upon $3.50 because the Tribunal thought that amount to be close to the average cost per prescription, but rather because the balancing of a number of considerations brought the Tribunal to a conviction of the rightness of that amount."
His Honour's exposition demonstrates how unsatisfactory the reasons are.
The trial Judge said:-
"Any statement of the reasons for making its determination of the appropriate fee for a ready-prepared prescription would have required the Tribunal to explain why it chose the figure of $3.50, rather than some other sum. Yet it did not do so. The Tribunal did reveal that the sum of $3.50 comprised two elements: $2.45 to cover labour costs and $1.05 for non-labour costs. The Tribunal did indicate the factors included in each of those elements. But it did not break down either figure or explain why it had been selected."
Such a failure has previously been perceived in reports of the Tribunal. In The Commonwealth of Australia v. The Pharmacy Guild of Australia and Anor, (No. VG 198 of 1989) heard by Woodward, Sheppard and Ryan JJ. and delivered 21 December 1989, which considered a determination of 27 January 1989, Woodward J. said:-
"In my view the fundamental cause of the difficulties which have arisen in this case is the failure of the tribunal to carry out its statutory duty, set out in section 98BD of the Act, to provide reasons in writing for each set of findings and determination which it makes. All that the Tribunal has done, in a lengthy statement referred to as its Twelfth Report, is to set out the contentions of the parties before it - essentially the Commonwealth and the Pharmacy Guild of Australia ('the Guild') - and to announce its conclusions. I can find nothing in the statement which could be described as a reason for preferring the Commonwealth's submissions to those of the Pharmacy Guild, which was the course taken by the Tribunal in deciding each issue relevant to these proceedings. The position is further complicated by the fact that many of the conclusions reached by the Tribunal are couched in esoteric terms which, presumably, are clear enough to those persons who appear regularly before the Tribunal, but because of their elliptical and allusive character are difficult for the uninitiated to understand fully and, I suspect, would puzzle many of the chemists whose livelihoods are so directly and seriously affected by the Tribunal's decisions. It can not be said too often that decision-makers who are subject to the Judicial Review Act, and particularly formally constituted tribunals, are under a clear obligation to explain their decisions in terms which can be understood by the people affected by those decisions; See Ansett Transport Industries (Operations) Pty Ltd v. Wraith
(1983) 48 ALR 500 at 507."
Sheppard J. said:-
"Before I conclude, there is one further matter which I should mention. In the course of his Honour's reasons for judgment, he made critical comments of the Tribunal's failure to provide reasons for its decision. This was not a matter independently relied upon as a ground for review either at first instance or on appeal. Nevertheless, I wish to indicate my agreement with what his Honour said about this matter. Notwithstanding the obligation which the Act imposes upon the Tribunal to provide reasons - see subsec. 98BA(4) and subsec. 98BD(2) - and the length of the Tribunal's report, I think it is a fair criticism of the Tribunal to say that the report consists of a reference to the relevant provisions of the Act, a comprehensive statement of the submissions of the Guild and the Commonwealth and the Tribunal's conclusions. The Tribunal's reasoning process is not disclosed. I would add my voice to his Honour's in saying that I think that this is unfortunate. The provision of reasons is an important aspect of the Tribunal's overall task. Reasons are required to inform the public and parties with an immediate interest in the outcome of the proceedings of the manner in which the Tribunal's conclusions were arrived at. A purpose of requiring reasons is to enable the question whether legal error has been made by the Tribunal to be more readily perceived than otherwise might be the case. But that is not the only important purpose which the furnishing of reasons has. A prime purpose is the disclosure of the Tribunal's reasoning process to the public and the parties. The provision of reasons engenders confidence in the community that the Tribunal has gone about its task appropriately and fairly. The statement of bare conclusions without the statement of reasons will always expose the Tribunal to the suggestion that it has not given the matter close enough attention or that it has allowed extraneous matters to cloud its consideration. There is yet a further purpose to be served in the giving of reasons. An obligation to give reasons imposes upon the decision-maker an intellectual discipline. The Tribunal is required to state publicly what its reasoning process is. This is a sound administrative safeguard tending to ensure that a Tribunal such as this properly discharges the important statutory function which it has."
However, notwithstanding the Tribunal's failure to state reasons for its decision, the trial Judge, in the exercise of the discretion conferred by s.16 of the ADJR Act, refused to make an order setting aside the challenged decision but remitted the matter to the Tribunal to give further reasons. His Honour ordered that:-
"1. The matter of the determination of the fees or other amounts to be added pursuant to Section 98B(2)(c) of the National Health Act 1953 to the moneys otherwise payable as the Commonwealth price of pharmaceutical benefits be referred back to the Pharmaceutical Benefits Remuneration Tribunal with a direction that, within a period of one month, the Tribunal publish a statement of its reasons for making the determinations which it announced on 28th August 1989, which statement, when read in conjunction with the Tribunal's statements of 28th August 1989 and 18th September 1989, will comply with the obligation to give reasons imposed by S.98BD(2) of the said Act.
2. Liberty be reserved to the applicants to make such further application as they may see fit in the light of those further reasons."
His Honour said in explanation of this order:-
"In a context where it had not been shown that the amounts fixed by the Tribunal were unreasonable and where the reasons, when furnished, might demonstrate that the determinations were free of legal error and in fact reasonable, the result would be to confer a windfall advantage on pharmacists at the expense of Commonwealth taxpayers. ...
It will not usually be right to make a party to an inquiry pay for the failure of the decision-maker to give proper reasons, especially where there is no ostensible basis for criticising the decision itself. Notwithstanding this comment, if I thought it likely that the task of formulating reasons might cause the Tribunal to doubt the correctness of the determinations which it had made, I would set aside the determinations themselves. But I do not consider this to be likely. Whatever may be said about their articulation of their mental processes, the members of the Tribunal have clearly given the question of appropriate dispensing fees considerable thought. They have examined many studies and obtained expert advice. They have considered the submissions of the parties. Although the critical reasoning is not revealed, the determinations cannot fairly be described as having been 'impressionistically formed.' Consequently, I propose to take the course urged on behalf of the Commonwealth and to refrain, at this stage, from setting aside the determinations themselves. Pursuant to s.16(1)(b) of the Administrative Decisions (Judicial Review) Act I will refer the matter back to the Tribunal with a direction that, within a period of one month, it publish a statement of reasons for its determinations which comply with s.98BD(2) of the National Health Act. Those reasons need not repeat matters already set out in the documents published on 28 August and 18 September 1989. But, when read in conjunction with those documents, the new reasons ought to meet the standards referred to in the extract from Our Town FM which I have set out above. Against the possibility that those reasons, when available, will reveal material justifying review under the Administrative Decisions (Judicial Review) Act, I will reserve liberty to the applicants to apply in connection therewith.
As to costs, the applicants have failed in their challenge to the determinations themselves. On the other hand, they have succeeded in their attack on the reasons of the Tribunal. They should recover the costs of that aspect of the case."
The effect which his Honour intended to give to the liberty to apply is not entirely clear. However, the parties have proceeded upon the footing that his Honour's order was not an interlocutory order but dealt finally with the matters which were in issue between the parties. That approach is consistent with the fact that his Honour heard the application, reserved his decision and gave what appears to be final judgment. The trial Judge did not seek further information from the decision-maker before ruling upon the grounds of the application for orders of review.
In these circumstances, we approach the matter on the basis upon which it was presented by counsel for both parties, namely, that the trial Judge heard and determined the application before him and that his Honour's order was not interlocutory in character.
In declining to set aside the Tribunal's decision, the trial Judge had in mind the provisions of s.98BE of the Act pursuant to which a determination of the Tribunal must operate prospectively, not retrospectively, as was held by Woodward, Sheppard and Ryan JJ. in No. VG 198 of 1989.
The trial Judge was concerned that, if the subject determination was set aside ab initio, it would cease to have had any effect with the result that the previous determination would continue in force, for its operation would not have been terminated, the result being that the pharmacists might obtain what the trial Judge described as a "windfall benefit".
In fact, the windfall benefit would have been limited, for the determination of 28 August 1989 was expressed to apply as from 1 October 1989 and its operation was subsequently suspended by the Tribunal in January 1990, with the result that, if it operated, it operated for only a few months. But in this sense, there could be a windfall benefit if, adequate reasons being given, no reviewable error was disclosed in the decision.
Notwithstanding an observation to the contrary by Brennan J. in his dissenting opinion in Repatriation Commission v. O'Brien (1985) 58 ALR 119 at pp 136-7, the law appears to us to be that a substantial failure to state reasons for a decision, in the circumstance that a statement of reasons is a requirement of the exercise under the statute of the decision-making power, constitutes an error of law. In In Re Poyser and Mills' Arbitration (1964) 2 QB 467 at pp 477-8, Megaw J. said:-
"I am bound to say this, and again I do not think it was disputed by Mr. Langdon-Davies, that a reason which is as jejune as that reason is not satisfactory, but in my view it goes further than that. The whole purpose of section 12 of the Tribunals and Inquiries Act, 1958, was to enable persons whose property, or whose interests, were being affected by some administrative decision or some statutory arbitration to know, if the decision was against them, what the reasons for it were. Up to then, people's property and other interests might be gravely affected by a decision of some official. The decision might be perfectly right, but the person against whom it was made was left with the real grievance that he was not told why the decision had been made. The purpose of section 12 was to remedy that, and to remedy it in relation to arbitrations under this Act. Parliament provided that reasons shall be given, and in my view that must be read as meaning that proper, adequate reasons must be given. The reasons that are set out must be reasons which will not only be intelligible, but which deal with the substantial points that have been raised. In my view, it is right to consider that statutory provision as being a provision as to the form which the arbitration award shall take. If those reasons do not fairly comply with that which Parliament intended, then that is an error on the face of the award. It is a material error of form."
See also the reasons of Fisher J. in Collins v. Repatriation Commission (1980) 32 ALR 581 at pp 594-5 and the view expressed by Keely and Fitzgerald JJ. in O'Brien v. Repatriation Commission (1984) 1 FCR 472 at p 504. To the same effect is the decision of the Court of Appeal of New South Wales in Pettitt v. Dunkley (1971) 1 NSWLR 376, in which it was held that the failure of the trial Judge to give reasons for his decision constituted an error of law because such failure made it impossible for the appellate court to determine whether or not the verdict was based on an error of law. At p 382, Asprey J.A. enunciated the duty which lay upon a judge to state his findings and reasons for his decision adequate for the purpose of enabling a proper understanding of the basis upon which the verdict had been reached. His Honour said:-
"If he decides in such a case not to do so, he has made an error in that he has not properly fulfilled the function which the law calls upon him as a judicial person to exercise and such a decision on his part constitutes an error of law."
At p 389, Moffitt J.A. said:-
"If a party is legally entitled in the particular case to have the reasons for verdict stated, in order that it will appear whether the verdict had been correctly come to in accordance with the law, then the error of law in giving no reasons has deprived the litigant of the right he had to have the Court of Appeal interfere if the decision involved an error of law. He would be aggrieved by the error of law and I think he would be 'aggrieved by ... the decision in point of law'."
At p 385, Manning J.A. said:-
"... I agree with Moffitt J.A. in his reasons for concluding that although it cannot be said that there was an apparent error in the decision of his Honour, it is sufficient to show an error of law in the judicial process".
More recently, that decision was applied by Kirby P., Priestley and McHugh JJ.A. in Apps v. Pilet (1987) 11 NSWLR 350. The latter case and Soulemezis v. Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247 provide helpful observations on what amounts to a substantial breach of a judge's obligation to state reasons for his decision; but we need not elaborate that point.
In our opinion, there was in the present case a substantial breach of the Tribunal's duty to state the reasons for its determination.
Certainly the trial Judge had a discretion as to the order he should make. We need not refer in detail to the examination of the discretion which was undertaken in Lamb v. Moss and Anor (1983) 49 ALR 533. At p 550, Bowen C.J., Sheppard and Fitzgerald JJ. said:-
"However, the natural meaning of the language used (in s.16 of the ADJR Act) is apt to confer upon the court a discretion both as to whether or not to grant relief, provided that a basis for relief is established, and, if relief is to be granted, as to the form of relief: cf Evans v Friemann (1981) 35 ALR 428 at 435, per Fox A.C.J. and Cox v Lightly (unreported judgment of Neaves J. delivered on 1 July 1983). The words 'in its discretion', are emphatic of the discretionary nature of the court's power."
The importance of the exercise of discretion at the remedial stage of proceedings is emphasised by Craig on Administrative Law at p 403.
In the present case, however, the reasons are so deficient that it is, in our opinion, impossible to ascertain whether there was any other error in the decision-making process. No error was established to the satisfaction of the trial Judge but that was a situation which was common prior to introduction of the many statutory provisions now existing in Federal law which require decision-makers to state in writing the reasons for their decision.
In their notice of appeal to this Court, the Pharmacists also alleged, inter alia:-
"a) That His Honour erred in finding that the Tribunal had regard to principles determined from time to time, by the Australian Industrial Relations Commission as being appropriate for the fixation of award wages and salaries. b) That His Honour erred in failing to find that the determination made by the Pharmaceutical Benefits Remuneration Tribunal on 28th August, 1989 was so unreasonable that no reasonable person could have exercised the power in that way. c) That His Honour erred in failing to find that the National Health Act 1953 contemplates that Pharmacists need to make a profit and this is a relevant consideration that the determination of the Tribunal failed to take into account."
In respect of these issues, the trial Judge found no error in the Tribunal's decision.
We do not think it useful to discuss these further grounds of challenge which were shortly argued in the appeal. Counsel for both sides submitted that, by reference to the Tribunal's final report, to its interim report, to Deloittes' study and to other material, it could be ascertained that the Tribunal took such and such into account or relied on this and that. The grounds were argued accordingly, reference being made to relevant legal authorities and to factors to which the Tribunal may or may not have given weight. In our opinion, as the Tribunal did not explain its course of reasoning, the basis for the grounds tended to fail, for the argument could find no foothold on any firm ground. For example, not having been informed why the $3.50 was adopted, it is difficult to hold that there was not a basis upon which a reasonable decision-maker could have come to that result. But this is simply to say that the reasons for the decision are so elusive that it was impossible for the Pharmacists to establish those grounds of challenge - unreasonableness, material and immaterial considerations etc - upon which they relied. The major flaw in the Tribunal's decision was that the Tribunal did not state reasons adequate to enable the Court to determine whether or not any other error had occurred in the reasoning process.
In these circumstances, the proper order was in our view that the Tribunal's determination be set aside ab initio.
In the circumstances, we would allow the appeal and would set aside his Honour's order substituting therefor an order that the decision of the Tribunal of 28 August 1989 be set aside ab initio. The respondent should pay the costs of the appeal and the costs below.
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